Li Ning shares jump as boss exits

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Li Ning shares jumped more than 10 per cent yesterday after the sportswear retailer announced its chief executive had stepped down and private-equity firm TPG Capital would get more involved in its daily operation.

The Beijing-based company said in a filing yesterday that chief executive Zhang Zhiyong had stepped down with effect from Wednesday.

While it searches for a new head, the company has appointed Kim Jin Goon, a partner at the US-based TPG Capital, as the executive vice-chairman and executive director to take charge of the company's internal affairs and operations.

Company founder and chairman Li Ning, a former Olympic gymnast, will continue to be responsible for external affairs.

Kim said yesterday that TPG would increase the investment in Li Ning, if needed.

Guotai Junan International analyst Jerry Peng Gangxiang said: 'TPG has had successful investment experience in the retail industry. Its involvement in Li Ning is considered a positive sign for the sportswear company's development.'

The stock has plunged more than 80 per cent in the past two years as the sports apparel and shoe retailer's sales have declined steadily due to rising competition and shrinking consumer demand since the 2008 Beijing Olympics.

Zhang, who joined Li Ning in 1992 as a finance manager, launched a series of measures to streamline the distribution network by cutting single-store distributors and setting up more self-run stores.

But the efforts failed to stop the slide. Last year, Li Ning's profit slumped 65 per cent from 2010. Last month, it said the order value from its trade fairs slated for the last quarter of this year had seen a 'high-teens' decrease.

Yang Jun, who runs a wholesale company selling Nike, Adidas and Li Ning products in Beijing, said Li Ning and several other local brands raised their prices by around 30 per cent last year, leading to oversupply in the market, at a time when consumers were pulling back on spending.

'To clear inventories, Li Ning now offers deeper wholesale price discounts than ever. But it's of little help because distributors are short of cash,' he said.

Yesterday the company also rolled out a blueprint to transform itself. Clearing inventories and improving the cost structure in production and operation top the retailer's agenda this year, according to the blueprint. Kim expects the inventory level to return to a normal level in six to 12 months.

It also intends to improve supply-chain management, improving products and lifting profitability.

'Actually, we are all clear about the weaknesses of this company. Its future will depend on how the company enforces the transformation plan,' Deutsche Bank analyst Feng Chen said.

Li Ning, once China's biggest sportswear retailer, was overtaken first by Nike and then by Adidas after 2000. It is also facing tough competition from local rivals like Anta, Xtep and 361 Degrees.

It has tried to rebuild its image by expanding overseas, changing its logo and targeting young customers. But many analysts see these moves as a diversion from the brand's core value and market.